Social platforms like YouTube are
revolutionizing the beauty industry, allowing smaller brands and online stars
to reach audiences in unprecedented ways. But for cosmetics giants, breaking
through that digital noise has become a major challenge.

“We are trying to stay in the
game. And it is all evolving so quickly. Every day is different and everything
is constantly changing,” said Jane Lauder, president of cosmetics brand
Clinique and the granddaughter of Estée Lauder, the founder of Estée Lauder
Companies, Inc.

The shopping habits of younger
buyers are very different from those of baby boomers and Gen Xers,
according to Lauder.

“My generation [Gen X] and
older would probably see an advertisement, get some information, go into
a store and buy it. … But shopping habits of younger generations are
different. They do more research, they are armed with information, and they
make decisions on their own versus looking for advice at the point of sale,”
she said.

Younger shoppers are more
influenced by their friends and social media. They are inspired by YouTube
influencers, or so-called vloggers (video bloggers), whose reach and influence
is enormous.

Shoppers between the ages of 18
and 34 now represent nearly 29 percent of the total beauty market, according to
Karen Grant, a global beauty industry analyst at The NPD Group, a market
research company.

It is a significant and
fast-growing demographic that big brands are still trying to figure out, she
said.

“One of the challenges is that
there are so many voices today,” Grant said. “In the past, the big brands
commanded the voice. They could afford to be in the magazine so they had more
visibility. Today, everyone can be online. So you don’t own the space anymore.
You can’t command more attention by just being big.”

YouTube Stars

Social media, particularly
YouTube, has created hundreds of beauty celebrities, including vloggers
Michelle Phan, Kandee Johnson, and Bethany Mota, in the last several years.
Makeup tutorials by these vloggers are among the most-viewed videos in the
beauty category on YouTube and have a direct influence on shoppers.

YouTube stars are more popular
than Hollywood celebrities among American teenagers, according to a survey of
1,500 teens aged 13 to 18, commissioned by Variety.

So some of these social media
stars have created their own beauty brands. Kylie Jenner, who was in the top 10
most-followed celebrities on Instagram last year, launched her own
cosmetics line in 2015.

Keeping Up With the New World

In order to compete with these
young upstarts, big companies like L’Oréal and Estée Lauder have to look beyond
the traditional channels, like magazine or outdoor ads. They need to adapt to
emerging trends and master new techniques to maintain their market shares.

“When we look at the United States
and many Western markets, Facebook, YouTube, and Google are the prime areas
that we focus on,” Lauder said.

Instagram, as well as Snapchat,
are also growing, she said.

Clinique, along with other big
brands, responded to the YouTube trend by signing deals or partnering with the
digital stars.

According to Lauder,
user-generated content provides a big marketing opportunity as well.

“We have spent a lot of time figuring out how
to encourage more user-generated content. I recently did a video on my own. It
is hard, it is not so easy to do. So we are encouraging customers to generate
videos,” she said.

Younger consumers constantly look
for what is new and what is different, so niche brands can be more appealing to
them, said Grant.

As a consequence, the big
cosmetics giants are shifting their traditional media and advertisement budgets
to digital. And to avoid losing market share to new independent brands, both
L’Oréal and Estée Lauder gobble up small companies.

Founded in 1946, the cosmetics
giant Estée Lauder today owns 29 brands, including Bobbi Brown, Clinique, Estée
Lauder, MAC, Origins, and Lab Series. The company recently added the Too Faced
and Becca brands to its portfolio.

Shopping habits of younger
consumers also shifted the focus from anti-aging skin creams to makeup in
recent years.

“We have not seen growth in the
anti-aging category in the last two years. But we have observed a tremendous
boom in makeup and complexion-related products,” Grant said.

More than 70 percent of the sales
growth in beauty products comes from makeup and this trend is mainly
driven by younger consumers and social media influencers, she said.

The Power of Word-of-Mouth

Cosmetics legend Estée Lauder was
a natural saleswoman and marketer. Today, many marketing strategies that her
company uses still resonate with her sales strategy and philosophy.

“From my grandmother’s point of
view, what made her successful was to understand the customers. … She spent a
lot of time in stores at the time. That’s how you can really know your
customers,” Lauder said.

Today, social media enables
customers to express their views online, a good opportunity for consumer brands
to better know their target market.

“The more you can understand your
customers, the better job you can do of creating products that are appealing,”
Lauder said.

Decades before social media,
Lauder’s grandmother believed in the power of word-of-mouth. She knew that
women who liked her products would spread the word. Her famous expression was
“Telephone, Telegraph, Tell a Woman.”

Social media helped word-of-mouth
to become powerful again.

According to Jane Lauder,
word-of-mouth is still the most effective form of marketing, and her
company is able to harness it with social media.

Clinique, for example, adopted a
unique way of sharing knowledge about the brand: Its beauty consultants who
work at the point of sale in stores also work as brand advocates through digital
and social media. They have vlogs and blogs that talk about all aspects of skin
care and beauty tips.

“The activities may change but the
thoughts remain the same,” Lauder said.